Football tournaments: The battle for the revenues - A Comparison of Club football and FIFA

Harry Arne Solberg Trondheim Business School, Sør-Trøndelag University College Norway

P TRONDHEIM BUSINESS SCHOOL

P Motivation - Background

• Different opinions between football officials from Europe and other continents observed at the 2015 FIFA congress • Africa/Asia/Caribbean delegates supporting Blatter – sceptical towards European football officials • European wanted to get rid of Blatter

Why? Some patterns:

• Media rights the dominating revenue for those at the top of the value chain (tabs) • Club football: The “Big-five” (England, Spain, Italy, Germany and France) more dominating than ever before • Revenues from exporting TV football increasing • Displacement of domestic football in the importing nations? • FIFA revenues equally distributed (Development programmes) Total revenues (€-million) Media rights: 2013/14 percentage of total English Premier League 3 898 54% Germany Bundesliga 2 275 32% Spanish La Liga 1 933 49% Italian Serie A 1 699 59% France Ligue 1 1 498 40% Netherlands Eresdivisie 439 18% Belgium Jupiler League 284 29% Austrian Bundesliga 161 18% Denmark Super League 149 18% Scottish Premier League 147 31% Swedish Allsvenskan* 133 16% FIFA revenues – Europe the number one market:

1998-2002 2003-2006 2007-2010 2011-2014 Media rights: Europe 464 (46%) 589 (45%) 1289 (54%) 1167 (48%) Asia / North Africa 504 604 South / Central America 329 356 536 713 North America / Caribbean 211 245 Rest of the World 72 54 Total media rights: 1000 1301 2405 2426

FIFA total revenues 1812 2629 4189 5718 Media rights – Big 5: From Domestic / International markets (€-mill.)

Period 1 Period 2 Period 3 Period 4

England 800 / 311 796 / 591 1299 / 908 2211 / n.c. (72% / 28%) (57% / 43%) (59% / 41%) - Spain 435 / 65 471 / 123 532 / 235 n.c. / 650 (85% / 15%) (74% / 26%) (75% / 31%) - Italy 793 / 70 817 / 91 858 / 117 1150 / 215 (91% / 9%) (89% / 11%) (88% / 12%) (84% / 16%) France 642 / 8 668 / 17 607 / 33 727 / 80 (99% /1%) (97% / 3%) (95% / 5%) (91%/ 9%) Germany 320 / 18 322 / 53 470 / 71 534 / 160 (94 % / 6%) (85% / 14%) (83% / 13%) (77% / 23%) The spending on media rights from the Big- Five as percentage of domestic leagues Asian Markets Malaysia 900% India 800% Thailand 700% Korea 300% Japan 100% South America Latin America 21% Top-5 European markets France 16% Italy 2,7% Germany 1,3% Spain 1,3% UK 1,2% Other European markets Nordics 77% Holland 70% Greece 39% Belgium 22% Turkey 5% The revenue of the average club compared to an average club in Premier League and Bundesliga (2013/14 season)

English Premier League German Bundesliga

Netherlands 12% 19% Belgium 9% 14% Austria 8% 13% Denmark 6% 10% Scotland 6% 10% Sweden 4% 6% Why?

• Technology innovations in media => increased capacity in frequencies • Economies of scale advantages in production/transmission of TV sport • Low transmission costs • High degree of sunk costs in production of live sport => favourable for export • Beneficial those that have the products of best quality, i.e. the big-five

Summary: • The market forces are “ruling” in club football FIFA

• 90-95% of revenues from the World Cup • Democracy: One nation – one vote (Not transparent) • Distribution of FIFA funds favouring the poor members • Financial assistance programme: Equal distribution • Goal project: Favouring low income members • Blatter the founder of these two programmes • The majority of FIFA members have low revenues • The Median Voter Theorem • The voter whose preferences are in the middle • 50% on each side Media voter theorem – a short introduction

• Typical issue: How much to spend on a project • Assumes the voters prefer one alternative to all the other (one peak) • In the example below, the majority will vote to increase/reduce until 300

Preferences 100 200 300 400 500

Voters: a b c d d Media voter theorem applied on explaining the distribution of FIFA’s revenues

Preferences Subsidising Equal Unequal More unequal Market-forces poor nations distribution distribution distribution distribute Voters: xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxx xxxxxxx xxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxx

The median voter is here Summary – conclusions:

• Market forces distribute the revenues in club football in a way that is favourable for those that have the best products • Technology innovations made it easier for the big-five to reach out • FIFA’s revenues distribution model favourable for the low-income football nations

Research question: Can the two different distribution models explain why football officials from other continents are sceptical towards Europe? Thanks for your attention